Oil Prices Soar After Non-OPEC Reduction Deal

Last Updated: December 12, 2016 12:18 GMT

Russian Energy Minister Aleksandr Novak (left) and Saudi Energy Minister Khalid al-Falih in Vienna after an agreement between OPEC and 11 major oil producers outside the cartel to curb production beginning in January.

The price of oil soared on world markets after a landmark deal by Russia and other non-OPEC members in which they agreed to reduce their production in a bid to slash the huge supplies of oil that had lowered prices.

The U.S. benchmark West Texas Intermediate was up $2.28 at $53.78 per barrel early on December 12 while Brent crude was up $2.29 at $56.62 per barrel.

"OPEC and non-OPEC's signing of the production cut agreement over the weekend was clearly the catalyst," said OANDA senior analyst Jeffrey Halley.

Russia and 10 other non-OPEC states said on December 10 that they will reduce their production by more than half a million barrels per day (bpd).

The deal is the first time non-OPEC members have reached an agreement on reducing production since 2001 and comes on the heels of a similar agreement by OPEC last month to reduce output by 1.2 million bpd starting in January.

OPEC leader Saudi Arabia also announced during the weekend that it will cut production beyond what was agreed on in Vienna by the OPEC countries, providing an additional boost for prices.

IG market strategist Jingyi Pan said oil prices have hit their highest since February 2015.

Despite the new spike, oil prices remain at about half of what they were in mid-2014.